August 22, 2007

A cultural/biological explanation for the Industrial Revolution?

Greg Clark has written a book that offers a different perspective on why the Industrial Revolution happened and the West got rich before the rest. The main argument of the book runs counter to most of today's theories, including ones that put the emphasis on property right and high-quality institutions. Clark believes the secret of growth lies in the rich and economically successful having had more children than the poor in England during the crucial centuries before the Industrial Revolution. This enabled, according to Clark, middle-class values of hard work, thrift, and entrepreneurialism to spread throughout English society, which in turn raised economic growth. Poor countries remain poor because they are stuck in a Malthusian equilibrium (and I guess because they do not have enough hard-working people).

Clark makes much of the fact that Indian cotton textile plants had much lower labor productivity than those in Britain in the 19th century despite having identical machinery. Clark thinks this points to low-quality labor (read laziness) as the key difference. Having recently seen how Toyota or BMW are able to eke out labor productivity levels in their South African plants equivalent to that in Japan or Germany, I think the example is far less telling (or general) than Clark thinks.

But the book has been making quite a splash. Tyler Cowen thinks the book "may just prove to be the next blockbuster in economics." David Warsh is much less impressed.

Comments

So all that state violence in cornering the world market, dispossessing the peasants and breaking strikes/unions had nothing to do with it?

That is so good to know. We can now forget history and turn to superior culture -- oh, and let's not forget to blame the (lazy!) workers. And better forget about the British Empire when discussing the Indian cotton textile plants...

But, then, in social Darwinism should factors just show who are the superior race/class...

Don't you think there is something a bit fishy with Clark's dismissal of institutions, when he says that one of the main reasons the cultural/biological processes took place in England was due to the institutional stability and security that was in place. In other words, the relative security of possession (or as Hume put it a system of property, contract and consent) produced an environment in which the behaviors that break us out of the Malthusian trap paid off.

I find Clark's book both fascinating and frustrating at the same time. Ultimately, the frustration exceeds the fascination precisely because of his desire to dismiss all alternative explanations rather than see his way to a synthesis. But perhaps I am just missing an important part of his argument.

But I am glad that people are discussing these issues in general and in that regard Clark's work will stimulate a lot of thought.

I think there have already been some discussions on Mark Thoma's blog about this and those who disagreed with the book's claims used evidence about social mobility and the birth rate of the various economic classes to counter the thesis.

There is never an end to the idea that some social groups are just superior to others and their wealth is proof of it.

I wasn't aware of this book, but if I understood it correctly this is not much else but the revival of good old Weber's argument: Capitalism emerged in the West, because of its widespread 'protestant ethic' with all its sedulousness and discipline as opposed to those lazy pagans. Same argument, just enhanced by the necessity of a sufficient 'fertility of the willing' - so in other words all we need in Africa is loads of Calvinist studs and vroom!!!

Old wine in new bottles, really! And as we know, contrary to conventional wisdom, quite often wine does not improve through time ... but becomes acid.

P.S.: For all those interested in the initial development of capitalism, and realise that it cannot be just about an increase in trade and technology I recommend reading the 'Brenner debate'. Robert Brenner does a brilliant job in bringing together Smithian, Malthusian and Marxian perspectives and combines them to form an intriguing explanation. Most highly recommended!

I agree with Pete Boettke that there is a too quick dismissal of anything other than the demographic arguments in Clark. I also agree with Warsh that Clark has not cited properly earlier advocates of his view.

Personally, I think that there is way too much attention being paid to this book. It should be more widely ignored. It seems to be part of this new wave of "IQ equals growth" and other genetically based arguments that are creeping in to economics. Maybe some of them are right to some extent. But I find those who push them hard, and there are some very pushy people out there on some blogs in this regard, to have a really nasty and unpleasant agenda about them that smells of things we have been through before and did not at all enjoy.

After all, what is the policy bottom line here? Eugenics? Enforced sterilizations? Uber immigration controls?

RE Rosser: He does not argue that it is genetics, per se. This seems to be a common misunderstanding, at least from what I'm reading on the blogs vs. what's in the book. He says that it could be *either* genetics or culture. He specifically states that he does not know which factor is driving the work environment change. He does argue that, whichever it is, its effect is to improve productivity and its behavior is the same.

RE South African productivity: actually, an argument in favor of Clark's position, I think. The "culture" of work and higher productivity extends to management as well, of course. Clark's indictment of, for example, low Indian textile productivity (or higher per-unit cost than the nominal hourly wage implies) is not an indictment of the worker alone but of the work culture at the factory and the society as a whole. I'd be surprised if Clark would voice any surprise to the finding that reproducing everything except the worker (but including the manager) would lead to an increase in productivity. He says that newly developed countries had difficulty reproducing developed country productivity rates but he did not cite any example of a developed country's factory and manager moving to the developing country and having low productivity. If anything, that seems to support the argument of the importance of a "work" culture.

Overall, there seems to be a rush to judge arguments in this book that don't actually seem to be in this book. I haven't finished it yet so it's probably premature for me to speak, but I do wonder if some people are critiquing the book based on the jacket cover or another blogger's critique of the jacket cover?

I am looking forward to the Weingast/North "A Conceptual Framework for Interpreting Recorded Human History," but there is no denying the mountain of interesting historical data in the Clark book. I completely disagree with his conclusions, but there's a lot to chew on. While Dani's aside about Tyler Cowen makes it seem like Tyler endorses the book wholeheartedly, the book discussion he is leading on the book I think is and will continue to provide a fuller understanding of the facts vs. speculation of Clark.

Apparently the genes that contributed to the development of the traits (thrift, hard work, entrepreneurialism) that led to the industrial revolution in England spread quickly, otherwise how would you explain the almost immediate adoption by Continental Europe of the same industrial techniques? I admire Clark for the courage to publish his theory; however his theory is so counter intuitive that one is led to believe that his real intention is to cause controversy.

His theory can be easily dismissed (with studies of social mobility or studies of academic performance of adopted children for example) but he will sure enjoy his fifteen minutes of fame. I particularly like studies that show that the academic performance of adopted children is not inferior to the performance of their new siblings. These studies capture two important factors in social mobility: (i) the importance of social class (the apple does not fall far from the tree), and (ii) the irrelevance of genetic inheritance. Adopted children come almost always from a lower (poorer) social class than the adopting family. According to people that think like Mr Clark they must carry bad genes. And yet, a number of these studies show that adopted children do not perform worst than their siblings, especially at college/university level. Interestingly adopted children do perform worst than their siblings before college/university, but apparently when they reach college/university the culture of the parents has had enough time to work its way through the character (genes?) of the adopted children. At this point any difference in academic performance gets erased.

"Having recently seen how Toyota or BMW are able to eke out labor productivity levels in their South African plants equivalent to that in Japan or Germany, I think the example is far less telling (or general) than Clark thinks."

Now, that's a very interesting observation, and I look forward to reading about it more here or in a paper.

One aspect of Clark's theory that troubles me is his tacit assumption that incentives for Indian workers under colonian rule would be the same as that within the conquering Britain. This seems very non-intuitive to me; even to this day, 6o years after independence, there is lingering resentment of foreign owership and capital. Worker strikes were a common and popular form of political protest against Britain, despite their obvious hardship to the worker's families.

And if incentives cannot be equated then it seems to me that one of Clark's primary arguments about productivity differences ( given similar machines)falls apart.

What I find depressing is that it always seems to be work like Clark's or that like IQ and the Wealth of Nations which that gets a big platform in the non-economic press. You'll read a lot less about the role of institutions in development (has Daron Acemoglu's book been profiled in the Times) or geography (and that's hardly for want of trying on Jeffrey Sach's behalf.)

Social Darwinism never quite vanishes and I'm inclined to think that this has far more to do with its role in justifying the current status quo than the strength of the arguments of the scholars who propound it.

Perhaps some of this discussion rests on the semantics and definition of the word "culture". I am interested in your thoughts on what I see as a few counter examples to productivity as simply a function of technology and organizational design.

- An economist friend who served as an adviser to the Indonesian government made strong comments on different levels of ambition, work ethic, and productivity between Chinese and non-Chinese Indonesians in the private sector. He also observed the same phenomena in Singapore. If true, is this difference between 3rd+ generation Chinese and native Indonesians/Malaysians a product of just the organizational design of their firms or access to capital?

- In the US, Southwest airlines vs. United/American/etc.. Same general organizational design and technology (granted: SWA has greater efficiencies by using a single-type of plane and using a non-hub flight structure). But even for the same tasks such as gate turnaround, SWA has something like 2x efficiency. They are also famous for better labor relations. Work culture plays no role at SWA?

- US auto manufacturers vs. German/Japanese manufacturers. Certainly US firms have known about the technology and organization design of their better performing rivals for quite some time, yet US cars are inferior and productivity rates are lower. If the productivity function consists of just these two input variables, why haven't the US firms adopted and rivaled the productivity?

Perhaps I am misunderstanding what Clark meant by "culture". He has (as far as I've read into his book) not given a really robust definition of what it is and the limits to its transfer in his hypothesis (i.e., is he really proposing that it is "racial" or genetic?). But it does not seem unreasonable that norms concerning effort level are a factor in firm productivity under market conditions without perfect competition. If they exist then I would call those norms "work culture".

AK--
I don't think Clark's argument focuses on culture. For if he were doing that then it would not be all that different from those development theories that use institutions as the independent variable (IV). For lest we forget, scholars have defined institutions in myriad ways.

For instance, some scholars have defined institutions as the formal and informal rules (norms, mores, culture) that operate within a society for structuring incentives.

Clark's work focuses on natural selection. He's positing that due to the high mortality rates of poorer segments of the European societies, certain -- progressive, if you will -- values were transmitted to successive (i.e. present day) generations. In sum, Europe's work ethic improved due to natural selection.

I think this is an interesting way of looking at development. At least by doing thus, scholars will again start endogenizing development.

However, interesting theory though it is, Clark's hypothesis creates some problems when a superimposed against other countries.

For instance, if the poor in Europe could not survive the evolutional pressures, how come the same did not happen in India or other poorer parts of the globe?

Clark might answer that this did happen and that majority of the Indian population today is descended from the higher socio-economic segments of society -- i.e. they are just like their European counterparts.

This, then, begs the question that are we to assume that the values of the Indian elites (back in the day) were different from those of European elites?

Here's a naive question for you all: if Clark is right (which I deeply doubt) why is New Zealand, where I live, and which nowadays has higher birth rates amongst the poor than wealthy at present, not experiencing economic decline?

I had an interesting personal experience with productivity along these lines that may be relevant to the story.

My first job when I got my BS degree in 1964 was with a US multinational in south America. We would first establish a factory using second hand equipment from the US and the factory productivity was low. But after the work force was trained and experienced we would bring in the latest and most advance machinery and the productivity would immediately rise to US levels.

Interestingly, the used machinery was moved to another country where the
process was repeated with exactly the same results
time and time again.

I remember Jane Jacobs talking about problems in transplant factories relating to the lack of a network of suppliers - particularly spare parts and repairs. One thing breaks that you can't repair and the whole factory stands still. Environmental not cultural.

Aqdas - I'll quote Clark. Ch. 1, page 8, "Just as people were shaping economies, the economy of the preindustrial era was shaping people, at least culturally and perhaps also genetically...This selection process was accompanies by changes in the characteristics of the preindustrial economy, due largely to the population's adoption of more middle-class preferences."

Actually, I'm a bit disappointed myself with Clark's argument so far. Having lived, studied, and worked in Japan I can attest to a culture of work there (much more so than that observed in visits to England!). He seems to completely ignore the role of autarky in Japan from 1600-1868, instead talking about the lower birth rates of the upper classes (true, but a product of the society that created the autarky -- and those relatively low birthrates continue today). I think that Friedman's Moral Consequences of Economic Growth is a more relevant work, but again I'm not done with Clark yet ;-).

Spencer and Reason, this may be true but does not explain different levels of productivity among different cultural groups in the same economy (i.e., Indonesia from my post above).

Speaking of the culture of work in Japan:
That reminds me of what Ha-Joon Chang has to say in his book "Bad Samaritans" (2007). If I recall it correctly in one chapter he talks about 'lazy Japanese' and 'thieving Germans'. What he (anecdotally) shows is that the perceptions, clichés and sterotypes on cultures of the late developers such as Japan and Germany were strikingly contrary to what the clichés are today. E.g. among others he discovered travel-reports on journeys to pre-industrialised Germany that complain about how unorganised, irrational and chaotic (!!!) the Germans are.

Chang's point is that perceptions of culture and ethic either may change quicker than one might think, or more likely that the stereotypes themselves have a lot to do with the actual perception of a countries state of development and not the perception of the people themselves. Something like: if you visit a rich country you automatically think that its people must be very cultured.

Compare that with today's predominant stereotypes on Africans or Latin Americans...!!!

i was really looking forward to buying this book but now after reading this discussion and the reviews, eh not so much.

What i'm not clear on...is Clark insinuating all this merely from the English records about the rich having more babies? What about other rich countries? Did they have similar demographics when they developed? Is it not likely the rich, with better nutrition (if not doctors) would have more babies anyway. What other information is he drawing on to reach to these conclusions?

The way Warsh described it, he goes from those English records to an indictment of aid and the entire development community pretty haphazardly. Just in this post there seem to be many clear counterpoints to Clark's contentions about supposedly less-than-productive developing countries.

FYI, a good antidote to Clark enthusiasts might be Karl Polanyi's "The Great Transformation", written over 50 years ago and addressing in detail the advent of industrialization in England, starting with several hundred years of enclosure acts and their discontents.

I read Greg Clark's book and really liked it. The book is much more effective in destroying previous explanations for the transition to modern growth than it is in proposing a viable alternative. But this is something that Clark acknowledges. He explicitly states that we know very little of the causes behind the transition to high growth. I learned several very important insights from this book. I will list a few:

1- The typical dating of the transition out of the Malthusian equilibrium is probably off by a century or two. This is so because the high productivity growth sectors had a very low weight in output (because productivity increases in the largest sector - agriculture - were low). Weighting growth by the sectoral weights of a later date reveals a break in productivity trends somewhere back in the 17th century. To me this is interesting because I think that what was key was the emergence of activities much less intensive in land and so more scalable. But at low levels of income people spend most of their income in food, thus trapping the economy in an agricultural-centered process, where the Malthusian mechanism of population growth causing declines in income more chance to work. This opens up other explanations for the Industrial Revolution that remain to be explored.

2- It is hard to argue that the lack of difussion of the industrial revolution in the XIX century was any of the usual suspects in today's most wanted list: poor institutions, lousy finance, lack of human capital. Within the British empire (e.g. in India) property rights were secure, financial markets were pretty open and efficient and there was quite massive transfers of managerial know-how through out-migration of British managers and skilled workers. The slow spread of the industrial revolution in the XIX century is an important puzzle to which the current development debate - which gets most of its intuitions from the post 1960 datasets needs to propose a convincing explanation. Contrary to Dani's opinion, I do find Clark's evidence of the textile industry in the XIXth century interesting, even if today cars in South Africa or textiles in China are produced with world-class productivity. It points, in my mind, to some other missing factor that is not a usual suspect.

3- It would be a pitty if the Clark book is dismissed because of his Darwinian argument. I find very interesting the following two facts. First, in olden days incomes were stagnant. Second, in those days, as opposed to now, the rich had substantially more surviving children than the poor. This means that on average there was a rather strong downward social mobility that lasted a pretty long time. I think these are facts and are very convincing as such. I find the idea that this lead to some form of genetic or cultural (why cultural?) selection that triggered changes in something related to the industrial revolution as completely unsubstantiated in the book. Economists use the subjective rate of time preference as a parameter explaining behavior that they take as exogenous. I know of no work that has established whether this is a genetically or a culturally determined parameter or whether it would buy much in terms of triggering a transition to high growth. Clark does show that there was a decline in interest rates, but this was a global phenomenon and not obviously related to the mechanism he has in mind.

I agree with Dani that the observation that Indian workers were less productive with identical machinery than their English counterparts does not hold much water. For example, the British diet could have been richer in iron or other micro-nutrients which allowed British workers to exert more energy during the workday. Moreover, incidences of diseases like hookworm or roundworm were probably much higher in India, as they require warm, moist, sandy climates. Both of these factors can depress labor productivity, as can a number of other variables. Resorting to individual "laziness" as an explanation is just that; lazy academics. In conjunction with the fact that Clark rules out so many other explanations so quickly, I would hesitate to support his claims.

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The Industrial Revolution (1760-1851) can be defined as the period where major transformations of European agricultural, technological, and manufacturing and production capabilities had a significant impact of the social, economical and political landscape of Europe.

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